The Justice Secretary admitted the Government had too little support to get the law through Parliament.

Mr Straw's plans to ban relatives and members of the public from inquests where secret intelligence or delicate diplomatic ties were involved had provoked fierce protests.

They were widely expected to be blocked by the House of Lords next week.

But in a startling U-turn yesterday Mr Straw confirmed that the measures 'still do not command the necessary crossparty support' and will be dropped.

Ditching the policy - which ministers insisted was essential to safeguard intelligence and international links - will raise fresh doubts over Gordon Brown's grip on his party and his ability to guide legislation through Parliament.

In a written statement Mr Straw said the Government would deal with exceptionally sensitive cases by ordering a public inquiry instead of a coroners' inquest - and allowing the chairman to hear parts of the evidence in private.

The plan to give ministers the power to order secret inquests was mooted last year.

Civil liberty campaigners claimed that eroding the vital role of inquests in holding the state to account over the death of individual citizens would be disastrous.

The said it could have prevented key facts coming to light about controversial deaths such as that of Jean Charles de Menezes, the government scientist Dr David Kelly, and Matty Hull, a British soldier killed by bungling American warplane pilots in Iraq.

The plans were dropped from counter-terrorism legislation last year but then resurfaced in the Coroners and Justice Bill.

In March an opposition attempt to block the legislation narrowly failed despite the fact that 19 Labour MPs rebelled and joined the bid.

This was even after Mr Straw offered concessions so that a senior judge would have the final say over holding an inquest in secret, rather than ministers.

Yesterday he said: 'The Government felt these changes struck a fair and proportionate balance between the interests of bereaved families, the need to protect sensitive material and judicial oversight of the whole process.'

But he acknowledged there was now little hope of getting the plans through Parliament.

Shami Chakrabarti, director of the civil liberties group Liberty, said: 'We welcome this sane and humble climbdown by the Lord Chancellor. It was completely bizarre for a Government that has spent over a decade lecturing the public about victims' rights to attempt to exclude bereaved families from open justice.

'Secret courts and parallel legal systems have mushroomed under New Labour but, as we have learned in recent days, there is no accountability without transparency.'

Tory justice spokesman Dominic Grieve said: 'This is yet another U-turn from a Government whose authority is in tatters - and a great victory for British justice.

'This Government's relentless attacks on the jury system over 12 years have been wholly unjustified.'